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KUALA LUMPUR: The recovery in IHH Healthcare Bhd‘s overseas business and resilient demand for healthcare should offset the near-term headwinds posed to the group due to the ongoing lockdown in Malaysia.

According to RHB Research, narrowing losses in Gleneagles Hospital Hong Kong, higher contributions from Covid-19-related services and cost-saving initiatives are offsetting the impact from the extension of Phase 1 of the National Recovery Plan.

In FY20, Malaysia contributed 19% of Ebitda while its hospitals in Singapore, India and Turkey accounted for 82% in aggreate with Greater China recording losses.

RHB noted that there is a global backlog in medical prodedures due to the pandemic, with elective surgeries in New South Wales, Australia, rising to the highest in any quarter in the decade, while backlogs in Canada and the UK could take years to clear.

“The backlog may actually be far bigger, given the lower number of referrals arising from the reduction in visits to general practitioners.

“We believe a similar trend will likely pan out in ASEAN, once vaccination rates start picking up,” it said.

RHB expects IHH to benefit from the strong pent-up demand gien the group’s scale and exposure to medical tourism.

Meanwhile, IHH’s 1Q earnings outperformed estimates due to the better-than-expected recovery in its ex-Malaysia segment while improved case mixes and its initiative in providing Covid-19-related services have broadly compensated for the loss in medical tourism.

IHH’s exposure to forex volatility was further reduced through pre-payments and cross currency swaps.

RHB lifted FY21-23F net profit by 1-12% after updating its latest in-house FX and in-patient admission assumptions.

The research house maintained “buy” with a new sum-of-parts target price of RM6.80 from RM6.55 previously.



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